Non-Compete Agreement

A non-compete agreement is also called a noncompete agreement, non-competition agreement or non-comp for short. In legalese, it's a covenant not to compete. It might accompany another agreement or be included as a clause within another agreement, such as a non-disclosure, severance or separation agreement.

Typically, signing a non-compete agreement will waive your employee rights to land employment with your employer's competitors. It might also waive your rights to compete with your employer in any other way, such as through self-employment. It will likely restrict you in time (e.g., for one year), geography (distance from your employer) or both.

An employer likely has the right to require you to sign a non-compete agreement or clause, for you to land or keep a job. That's because employers have the right to protect their businesses.

But, the courts typically frown on employers requiring current employees to sign new agreements that waive their employee rights without some sort of compensation in return, other than just keeping their jobs; so, if you're a current employee, then your employer might offer you a "bribe" to get you to sign a non-compete agreement, such as a benefit or perk.

If you're a resigning employee, then your employer might offer severance pay or extra severance pay to get you to sign a non-compete agreement. If you're about to become a new-hire, then your new employer might not offer anything to get you to sign, except for the job; in the eyes of a court, landing a job alone is likely to be sufficient compensation for signing a non-compete agreement.

Generally, employee non-compete agreements are "legal" (enforceable) in most states, if they are reasonable in scope. If non-compete agreements are too restrictive, such as in time or geography, then the courts might make the agreements null and void or selectively strike the unreasonable clauses within.

In some states, employee non-compete agreements are not enforceable or enforcement is more limited compared to other states; for example, at this writing, California enforces non-compete agreements only in regard to the sale of businesses or dissolution of partnerships, if common-law restrictions don't come into play.

To discover to what extent a non-compete agreement is generally enforceable in the state in which you work, start by contacting the relevant state labor department. To learn of enforceability specifics for your particular agreement, you'll likely need to consult an attorney; the same goes to receive specific legal advice about breaking your particular non-compete agreement.

If you have questions or doubts about signing a non-compete agreement (or any employment agreement), then it's a good idea to consult an attorney. To avoid enforceability problems, your employer will likely give you a reasonable amount of time to sign, so that you may first consult an attorney. Consulting an attorney will likely cost a fee, but it could save you a lot in heartache and legal expenses down the road.

For example, if you break your non-compete agreement by hiring on with a competing employer, then the former employer with whom you've agreed not to compete might sue you. Your former employer might also sue the competing employer, if the competing employer doesn't fire you after learning that you've allegedly violated your non-compete agreement.

See About Employment Contracts and Agreements for additional information.